âAll out warâ threatened over North Korea attack on warship Cheonan

Given recent price movements i think this is a perfect opportunity to load up on equities and sell bonds.

North Korea has threatened âall-out warâ if there Seoul retaliates for the torpedo attack that sank the South Korean warship Cheonan in March.

Pyongyang made the threat as it dismissed as fabrication a report by an international team of investigators that concluded that a torpedo fired by a North Korean submarine was responsible for the explosion that ripped the 1,200-tonne corvette in two, killing 46 sailors in one of South Koreaâs worst naval tragedies.

In an escalating war of words Lee Myung Bak, the South Korean president vowed to take âresolute counter-measuresâ against North Korea for the torpedo attack on the Cheonan, which happened near the disputed border between the two countries.

The investigatorsâ report, published today, is understood to include a computer simulation of the attack in which the Cheonan is shown being struck by an acoustic homing torpedo armed with a quarter-tonne warhead.

It concludes: âThe evidence points overwhelmingly to the conclusion that the torpedo was fired by a North Korean submarine. There is no other plausible explanation.â

Britain and the US immediately threw their support behind the reportâs findings. William Hague, the Foreign Secretary, condemned the attack and its âtotal indifference to human lifeâ.

âThe UK and international partners are committed to working closely with the Republic of Korea as they consider an appropriate multilateral response to this callous act,â he said.

The White House described the attack as an act of aggression that constituted a challenge to international peace and security.

The ship was on routine patrol in the Yellow Sea near Baengnyeong Island, a heavily garrisoned outpost that lies off the North Korean coast, when it suddenly exploded and sank. The maritime boundary has been disputed since the ceasefire that ended fighting in the Korean war in 1953.

Almost immediately speculation began that it had been deliberately targeted by North Korea.

The 58 crew members rescued after the blast said that they believed the explosion had come from outside the corvette. Captain Choi Won Il said that officers at the time reported an external shock. "It seemed to be a shock from outside," he said. However, until the report was published yesterday, the official position in Seoul was to resist directly accusing the unpredictable North of deliberately attacking the Cheonan, although senior officials made it clear this was what they believed happened.

The issue is set to dominate the agenda during Hillary Clintonâs Asian tour, which begins today.

Kurt Campbell, Americaâs most senior diplomat for Asia, said that a âcentral issue of discussionâ for the US Secretary of Stateâs talks with Chinese officials would be âtheir assessments of developments in North Korea and their reaction to the reportâ.

The US âstrongly supportsâ the investigationâs conclusions and âhas a deep, enduring and profound [interest] in the maintenance of peace and stability on the Korean peninsulaâ, he said.

In a telephone conversation with Kevin Rudd, the Australian Prime Minister, Mr Lee promised strong measures against Pyongyang for the attack.

âResolute countermeasures will be taken against North Korea,â the South Korean President said South Korea, through strong international cooperation, âshould make North Korea admit its wrongdoing and return as a responsible member of the international communityâ, he added.

The shipâs sinking is expected to be taken before the UN Security Council.